The Impact of Macroeconomic Factors on Banking Sector in Pakistan

This study is predicated on a range of macroeconomic variable swings that ultimately lead to a decline in Pakistani bank lending practices or performance. These signals, which are the result of macroeconomic variables, have an impact on how financial institutions and the banking industry behave. Positive signals now boost the banking industry, while negative signals eventually lead to subpar lending and performance. Research has also shown that, in comparison to local banks, international banks are more impacted by these signals. The percentage change in bank advances is the dependent variable, while the independent variables are inflation, GDP, money supply, interest rate, and exchange rate. Research indicates that these shocks also contribute to a decrease in the generation of credit by diminishing the creditworthiness of firms or by Destroying bank’s capital.